- Solid second quarter sales and earnings compared to record results in 2021
- Total sales decreased 9.2% from 2021 and increased 16.4% from 2019
- Comparable-store sales decreased 10.3% year-over-year
- EPS of $0.99 and Non-GAAP EPS of $1.10
- Well positioned for Back-to-School season with high-quality, fresh product
- Expect to achieve the lower end of original earnings guidance range
- Repurchased $40 million of stock
NEW YORK, Aug. 19, 2022 /PRNewswire/ — Foot Locker, Inc. (NYSE: FL) (“Foot Locker” or “the Company”), the New York-based specialty athletic retailer, today announced that, as part of a planned succession process, Richard A. Johnson will retire as President and Chief Executive Officer, effective September 1, 2022. Mary N. Dillon, former Executive Chair and CEO of Ulta Beauty, Inc., has been appointed President and Chief Executive Officer and a member of the Foot Locker Board, also effective September 1, 2022.
Johnson will continue as Executive Chairman of the Board through January 31, 2023, and will step down from the Board at that time, subsequently remaining with the Company as a Senior Advisor to the Chief Executive Officer until early April 2023 to facilitate a smooth transition. The Company’s Board has determined that the Chair and Chief Executive Officer roles will be separated, also effective September 1, 2022, and the Company’s Lead Independent Director, Dona D. Young, will become non-Executive Chair, effective February 1, 2023.
In 2016, I wrote that Foot Locker had a GPS, “I brought up the discussion on Sports Authority going bankrupt and Finish Line closing stores. [N]ot only Mom and Pop stores/small accounts are closing down, Nike is affecting larger chains as well.
Well, it’s affecting everyone except Footlocker Inc. which appears to have a GPS for success. As Sports Authority is going out of business and Finish Line is trading at a paltry 24.01, Footlocker is kicking ass at 68.25 and has earned its way onto several lists as a “Buy Now” stock. What exactly is Footlocker doing that the other companies aren’t? Why is it that Footlocker, who traditionally was linked at the waist with Nike hasn’t seen any slowdown in its growth with Nike making such a strong push to DTC?”
Since I wrote the words above, Finish Line is now owned by JD Sports after taking a poison pill to prevent a hostile takeover. Hibbett Sports launched ecommerce and bought City Gear. Foot Locker invested in a host of startups: Super Heroic, closed down. Rockets of Awesome laid off staff and closed stores and Foot Locker’s internal startup Greenhouse launched an app and then disappeared. Foot Locker also became a victim of Nike’s DTC and adjusted their business by reducing the amount of Nike product they carry, or was it the other way around?
In 2022, the GPS connection to Nike is a Garmin plug-in device while retailers like Dick’s and Hibbett Sports are connected to Maps via iPhone and Google Maps via Android. In other words, the relationship from Foot Locker to Nike still works, but you can no longer see Nike’s growth as being lifting Foot Locker as it once did. What does this mean as Dick Johnson steps down and Wall Street appears to be enamored with the choice of Mary Dillon as the next CEO?
It means that Wall Street remains confused about what will improve a business. Dillon’s time at Ulta was rooted in an industry where significant challenges damaged the old guard. Beauty has been completely disrupted because of Instagram and YouTube tutorials. Ulta’s growth benefitted from a market that expanded considerably because of how marketing shifted. Companies like L’oreal, which has been acquiring smaller beauty brands, but still facing headwinds, and Revlon, filed for bankruptcy. Ulta and Sephora capitalized on the shift from traditional media marketing to digital strategies. Which does bode well for Foot Locker under Dillon, but Dillon is walking into a battle unlike anything any market has seen.
Nike is such a dominant force in the sneaker industry, the brand can damage the perception of a retail giant by simply adjusting how much product they are allotting. While Wall Street appears to be okay with Foot Locker’s quarterly performance and the announcement of a change in leadership, it should be noted that Foot Locker stores still have House of Hoops and Flyzone as major merchandised areas within their stores. This means Nike is still a major component of Foot Locker’s strategy and as of right now there doesn’t appear to be a more developed concept for a highlighted partnership with adidas.
What’s even more complex is if Nike feels that Foot Locker is going to give adidas, New Balance or On Running more shelf space, Nike may become more frugal over the next six months placing Foot Locker in the peculiar position of relying on Yeezy in the critical holiday season where Nike dominates and any increase of product allotment from Yeezy diminishes the value of that brand.
Foot Locker has a broken FLX app and a website that was at 15.9 million visits per month in 2017 and is now at 13.8 million visits per month in 2022. In comparison, a sneaker site that doesn’t have any stores grew from 3.21 million visits per month in 2017 to 35 million visits. That site is StockX. Should Wall Street be excited about the retirement of Johnson and high on Mary N. Dillon taking the helm? No. Wall Street should pay close attention to how Foot Locker continues to promote other brands to create a more balanced approach to their product mix marketing. Wall Street should ask about the FLX app and question if those declines in the quarterly report prompted Dick Johnson to step down at this moment.
Note:
A quick third-party research note, I performed a search on Men’s footwear for Nike and adidas. Resale is an indicator of brand heat and a measurement tool of the average sale price of a brand. This comparison will highlight the possible amount Foot Locker will have to make up with adidas if Nike decides to squeeze Foot Locker.
Nike:
$149.23 Avg sold price
2,335,384 Total sold
300,137 Total sellers
$348,509,354.32 Total sales